The objective of this case is to connect your prior experience with financial accounting (and financial statement analysis) with the role of a financial manager. Students will calculate and interpret ratios from the perspective of a financial manager; and also apply more complex topics, including agency theory, capital cost allowance, and capital structure choices.

Description

Amazing Brentwood Inc bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value.

In the year of 2018, The firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710.

5. Calculate the TIE ratio and also respond whether it is satisfactory or not?

6. How will issuing more shares affect the capital structure of the company?

7. What does the firm need to do to raise its ROE?

8. Calculate the profit margin ratio of the company and comment on the profitability performance of the company.

9. What type of financial decision is the company making with the expansion?

10. The disagreement among the shareholders, BOD and the managers is popularly points to what in finance?